Under variable costing, operating income is measured by:
A) Gross margin minus operating expenses
B) Throughput minus operating expenses
C) Contribution margin minus indirect manufacturing and operating costs
D) Sales minus variable costs

Question

Quizplus · Accepted Answer

Under variable costing, operating income is measured by the contribution margin (sales minus variable costs) minus both indirect manufacturing costs (which are variable) and operating expenses. This approach does not include fixed manufacturing overhead in product costs, distinguishing it from absorption costing.

Under Variable Costing, Operating Income Is Measured By